Mortgage Bankers Association Reports Q2 Mortgage Data for U.S.

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The Mortgage Bankers Association (MBA) released this week their second quarter 2015 Commercial Real Estate / Multifamily Finance Quarterly DataBook.

The MBA reported the following data points for the U.S. mortgage marketplace:
 
U.S. ECONOMY

The economy grew at a seasonally adjusted annual real rate of 3.9 percent during the second quarter, making up for some of the slow growth seen during Q1.  Job growth was similarly strong, averaging a seasonally adjusted 230,000 jobs per month during the quarter.  The unemployment rate started the quarter at 5.4 percent, ended the quarter at 5.3 percent and subsequently fell to 5.1 percent in August.  Given the relative strength, Federal Reserve FOMC members have indicated they anticipate raising the Fed Funds rate in one of their two remaining meetings of the year.  Even so, the 10-year Treasury yield remains low -- averaging 2.17 percent during August and finishing September around 2.1 percent.

U.S. PROPERTY MARKETS

During the second quarter average vacancy rates for the major property types were flat, and rents increased.  Average national vacancy rates were unchanged from last quarter -- for apartments at 4.2 percent, for office properties at 16.6 percent and for retail properties at 10.1 percent.  On a year-over-year basis, apartment rents rose 3.6 percent in the second quarter, office rents rose 3.2 percent and retail rents rose 1.9 percent.

Property sales transactions fell from the first to the second quarter, but year-to-date volume is up 35 percent from the same period last year.  And property prices continue to climb.  The Moody's/RCA Property Price Index rose 3.6 percent during the second quarter, and the NCREIF TBI showed a 5.7 percent increase in property values.  Cap rates are down from a year ago, and generally flat from the first to second quarter.

Commercial real estate construction continues to pick up.  The value of commercial construction put-in-place in July was 0.8 percent higher than the June level, and 31 percent higher than the July 2014 pace.  On the multifamily side, a seasonally adjusted annual rate of 440,000 units were permitted and 381,000 units were started in August -- 22 percent and 25 percent higher, respectively, than in August 2014.

U.S. MORTGAGE ORIGINATIONS

Second quarter 2015 commercial/multifamily mortgage loan originations were 29 percent higher than during the same period last year and 16 percent higher than the first quarter of 2015.  The rate of year-over-year growth in originations slowed from the first quarter, but year-to-date lending is up for every major lender group.  Mortgage bankers' originations for Fannie Mae and Freddie Mac are near record quarterly levels.

By investor type, compared to the second quarter of 2014, the dollar volume of loans originated in the second quarter of 2015:

• Increased 113 percent for Government Sponsored Enterprises (GSEs - Fannie Mae and Freddie Mac);
• Increased 64 percent for commercial bank portfolio loans;
• Increased 14 percent for life insurance company loans; and,
• Decreased 17 percent for Commercial Mortgage Backed Securities (CMBS) loans.

LOAN PERFORMANCE

As commercial property incomes and values continue to climb, and financing remains plentiful, loan performance continues to improve as well.  Commercial and multifamily mortgage delinquency rates were down broadly in the second quarter, with highlights including the lowest 30+ day delinquency rate on bank-held multifamily loans since the series began in 1993, and 60+ day delinquency rates below 0.06 percent for loans held by life companies, Fannie Mae and Freddie Mac.

Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of the second quarter were as follows:

• Banks and thrifts (90 or more days delinquent or in non-accrual): 0.90 percent, a decrease of 0.13 percentage points from the first quarter of 2015;

• Life company portfolios (60 or more days delinquent): 0.06 percent, unchanged from first quarter of 2015;

• Fannie Mae (60 or more days delinquent): 0.05 percent, a decrease of 0.04 percentage points first quarter of 2015.

• Freddie Mac (60 or more days delinquent): 0.01 percent, a decrease of 0.02 percentage points first quarter of 2015;

• CMBS (30 or more days delinquent or in REO): 5.00 percent, a decrease of 0.17 percentage points from the first quarter of 2015;

U.S. MORTGAGE DEBT OUTSTANDING

Rising property values are supporting increased levels of commercial and multifamily mortgage debt. The total amount of commercial and multifamily mortgage debt outstanding continues to grow at a strong pace, particularly on the multifamily side. For the first time ever, multifamily mortgage debt outstanding now exceeds $1 trillion and is growing at almost 10 percent per year.

The level of commercial/multifamily mortgage debt outstanding increased by $38.5 billion in the second quarter of 2015, as three of the four major investor groups increased their holdings.  That is a 1.4 percent increase over the first quarter of 2015.  Total commercial/multifamily debt outstanding stood at $2.72 trillion at the end of the second quarter.  Multifamily mortgage debt outstanding rose to $1.0 trillion, an increase of $23.6 billion, or 2.4 percent, from the first quarter.

Banks and thrifts saw the largest increase in dollar terms in their holdings of commercial/multifamily mortgage debt - an increase of $18.5 billion, or 1.9 percent.  Agency and GSE portfolios and MBS increased their holdings by $14.5 billion, or 3.4 percent, and life insurance companies increased their holdings by $8.8 billion, or 2.4 percent.  Finance companies saw the largest decrease at $6.3 billion, or down 14.3 percent.

The $23.6 billion increase in multifamily mortgage debt outstanding between the first quarter and second quarter of 2015 represents a 2.4 percent increase.  In dollar terms, agency and GSE portfolios and MBS saw the largest increase in their holdings of multifamily mortgage debt, an increase of $14.5 billion, or 3.4 percent.  Commercial banks increased their holdings of multifamily mortgage debt by $9.9 billion, or 3.2 percent.  Life insurance companies increased by $1.3 billion, or 2.2 percent.  CMBS, CDO and other ABS issues saw the largest decline in their holdings of multifamily mortgage debt, by $1.6 billion, or down 2.2 percent.